Murray Rothbard died before he could write the third volume of his famous History of Economic Thought, which would cover the birth and development of the Austrian School, through the Keynesian Revolution and Chicago School. With this six-lecture course, however, the History of Economic Thought is complete.

5. Mises and Austrian Economics

The essence of Austrian economics is based on the analysis of individual action. In other words, it is about individuals doing things, having purposes and goals and pursuing them. Other schools of economics deal with aggregates, groups, classes, wholes of one sort or another, without focusing on the individual first and building up from there.

Austrian economics builds on an earlier French and Italian tradition, really beginning with the Spanish scholastics in the 16th century, and then proceeding on in France with Cantillion and Turgot in the 18th century. Economics not only predated Smith by several centuries, but also was much better than Smith.

It seems not to be an accident that labor value came from Scotland because Scotland was the classical home of Calvinism, and Calvinist doctrine is that labor is a key thing. Everybody is doomed to work and consumer enjoyment is evil. Three fallacies are embedded in the British classical school: labor theory of value, aggregate class struggle of shares of income, and a focus on nonexistent, unreal, long-run equilibrium. Additionally, Ricardo totally divided macro from a micro sphere. There is no talk about entrepreneurs.

Subjective value theory, individuals making their valuations in marginal units, preferences are ordinal (by ranking), and economics is more a philosophic subject, not mathematical, are four Austrian issues.

Capital takes time. Interest is determined by a person’s time premium rate on present goods immediately available. The entrepreneur is the key figure in the profit and loss system.

Mises healed the micro-macro split, by applying the marginal utility theory to money. The only thing an increase in the money supply does is to dilute the purchasing power of the money unit. First receivers of new money benefit to greater degrees than final recipients. Money must originate out of the free market, not by government edict. Fractional reserve banking is fraud.

Mises created his Austrian theory of the business cycle. Increasing the central banking supply of money not only causes inflation, but also causes other disturbances. Mises singlehandedly stopped Austrian inflation in the 1920s, stopped it from becoming hyperinflation. He also warned about the Great Depression. Prices were being kept level, but they should fall in free markets due to increased productivity (as they do in computers).

Mises became the uncompromising, hardcore laissez-faire capitalist. Human Action is the great work of the 20th century.

The fifth in a series of six lectures on the History of Economic Thought.

00:00
this is a difficult to work explain the
00:03
world watering economics and visas role
00:05
and a short period of time I’ll try to
00:08
my best the first place about Austrian
00:11
economics contrary to many impressions
00:14
has nothing to do with Austria I know
00:18
nothing about the economics of Austria
00:19
doesn’t mean it’s not doesn’t mean it’s
00:21
not a viable subject I don’t know much
00:24
about it
00:24
also there very few Austrians less than
00:27
Austria yeah they’re all here
00:33
oh sweet economics began as they in
00:40
university of vienna and with karl
00:41
menger the early austrians learned be
00:44
located in austria and then when the
00:46
doctrine permeated outward the essence
00:51
of austrian economics says it’s based on
00:54
and contrast to all other schools
00:57
including your alleged free-market
00:59
schools of economics hosting economics
01:03
is based on analysis of individual
01:07
action and those individuals doing
01:09
things having purposes and goals and
01:11
pursuing them this immediately sets us
01:15
apart with all the other schools the
01:16
economics view of aggregates groups
01:19
classes holds and one sort or another
01:23
without without focusing on individual
01:25
first and building up from there I’d
01:28
have to start with I could easily make
01:30
this about five hours sort of 45 minutes
01:32
I’m gonna try to truncate this ocean
01:35
economics basically lives on an earlier
01:39
tradition of French French and Italian
01:41
especially French continental tradition
01:44
really beginning with the Spanish
01:45
scholastics in the middle in the
01:47
sixteenth century and then proceeding on
01:50
to in France with Catalan on Torgo in
01:53
18th century this was very and one for
01:56
various reasons this knowledge was lost
01:58
to economics thought and superseded by
02:02
the British classical school by Smith
02:03
and Ricardo on their their followers so
02:07
this immediately starts anew now
02:09
the history of thought because mostly
02:10
most economists I think still think that
02:13
economics began sort of other out of a
02:16
four-headed Adam Smith you know some
02:18
piece of these sexy sort of created is
02:19
like Athena springing her brows juice
02:22
actually economics not only predated
02:25
Smith by several centuries but also was
02:27
much better than Smith no equivalents of
02:30
a Klein anyway the British classical
02:34
school Smith Ricardo etc John Stuart
02:38
Mill focused on aggregates and groups
02:41
and classes rather than the individual
02:42
number one basically the sum up the
02:46
classical school of several key
02:48
fallacies ur and these this was a
02:50
dominant at so many came in rather 1871
02:54
one of the value economic value price is
02:57
determined by the cost of production the
02:59
cost of production embodied in some
03:01
fashion and the product and specifically
03:04
by the quantity of labor our is embodied
03:06
in it and we can see while seeing almost
03:09
automatically if we look at this thing
03:10
kind of clear I’ve fashioned there’s
03:13
something wrong with it because I could
03:14
work remember those a movie instead of a
03:16
charming movie a great remove that came
03:19
in about twenty years ago
03:21
I forget the title but the essence of it
03:23
was some great inventor and somewhere in
03:26
the West of England living a totally
03:27
isolated and he kept inventing great
03:30
things like a radio and then television
03:32
a lot except the don’t even invented
03:34
twenty years before he didn’t know about
03:36
it so he’s a great inventor a just even
03:40
better little wheel whatever too late
03:42
but he was working you know put him up
03:45
to put in hundred thousand labor hours
03:46
and these inventions somebody is so
03:48
obviously zero so the economic value
03:50
with enough obviously depend on his
03:52
quantity of labor hours the class what
03:56
the classical school had to do dismiss
03:58
is unimportant a whole group of economic
04:01
goods and not a move explain their value
04:04
namely we produced non reproducible
04:06
objects because goods are not being
04:08
produced anymore like Rembrandt’s me
04:11
remember I put in a certain number of
04:12
labor hours I suppose
04:13
but the price of Rembrandt’s keeps
04:15
fluctuating since then not in the courts
04:17
of some of these input on hopes
04:19
otherwise be 48 so so what determines
04:23
the value of Rembrandt well he couldn’t
04:25
figure it out they just have to leave it
04:27
aside on us as unimportant they couldn’t
04:30
deal about what consumers either because
04:32
with consumers that came up against
04:34
famous value and paradox which he took
04:37
me history economics always tell us
04:40
about it Smith was Buffalo by the value
04:41
of paradox the peculiar thing was he
04:43
solved with himself about twenty years
04:44
before so it’s really odd kind of
04:46
situation linear a in the wealth of
04:48
nations he sets forth the value of
04:51
paradoxes terrible thing can’t
04:52
understand it and one hand is diamonds
04:54
let’s say in the other hand there’s
04:56
bread or water if use either one of the
04:57
two and bread is of staff of life it’s
05:00
philosophically extremely important very
05:03
necessary and yet it’s very cheap on the
05:05
market always economic value of zilch
05:07
that’s rich cheap but not zero water is
05:10
the economic value used to be zero and
05:12
the other hand we have diamonds which
05:15
are mere trickery a luxury item and so
05:17
forth so on an Adam Smith me a good
05:19
Calvinist
05:20
so they have zero value diamonds and yet
05:24
they’re very expensive they’re very high
05:25
economic value so you couldn’t figure
05:26
that out the value of paradox in bread
05:29
which was extremely useful yet has very
05:31
low economic value and diamonds return
05:34
useless or almost you supposin have very
05:36
high economic value and we concluded
05:38
economics can solve this to just a split
05:41
between valuing use of value of an
05:43
exchange there’s no way to solve that we
05:46
have a rule of exchange value forget
05:47
about use value now you see right away
05:49
to suck up the conditions for the whole
05:53
bunch of left wing thought from late
05:54
19th early 20th century epoch we’re
05:56
still going on I suppose the separation
05:58
between value for use of value for I
06:00
mean production for use of production
06:01
for profit as we immediately set that up
06:03
as somehow is a big distinction he said
06:06
therefore we have to sweet can’t deal
06:08
with consumers we can’t deal with non
06:09
reproducible good we have to deal with
06:10
producer will be producible goods and we
06:13
only talk about so she can’t talk about
06:14
consumers value must come from something
06:17
inherent in the object namely we
06:19
four hours another using easily used
06:22
labor hours as that time was trying to
06:23
he and Ricardo or trying to measure
06:25
value of a time because science meant
06:28
measurement even those days for these
06:30
people and so therefore how do you
06:32
measure value any measured changes we’re
06:34
looking for some hard quantity and it
06:36
concluded labor hours of about the best
06:38
thing they could get tip so that was one
06:40
big fallacy when big dominant fallacy
06:42
and economic thought when thinner was
06:45
started to write the other big another
06:46
big fallacy is that they since they
06:49
couldn’t deal with individuals at all
06:51
they’re dealing with classes they had a
06:54
separate thing called distribution
06:55
theory distribution trying to figure out
06:57
this is Ricardo in particularly who did
06:59
to decide how much how much of the
07:01
national output goes the wages how much
07:04
goes the profits how much goes to
07:05
landlords and so it Japanese the way he
07:08
set it up whether the class struggle
07:10
between feed these two between mighty
07:11
groups in other words the good is
07:13
produced somewhere someday produce it
07:15
then they fight for who gets the
07:17
different shares of link on the laborers
07:20
laborers getting that can mess up here
07:23
labors of the dirty end of the stick but
07:25
the wages are determined by the iron law
07:27
of wages Malthusian are on board down a
07:29
subsistence levels we all know we’re
07:30
sitting here living at subsistence level
07:32
over at the Anaheim Hilton everybody
07:35
gets the lowest possible wages exterior
07:37
workers and capital and capital S and
07:40
landlord’s fight it out for the rest of
07:41
it with usually landlords winning out
07:44
because they get an increasing share of
07:45
unproductive group of people get
07:48
increasing share of of income well this
07:51
obviously led this analysis seems to me
07:53
led logically straight away through Marx
07:56
and Henry George two different sets of
07:58
thinkers but when each focusing on
07:59
different aspects of Marx focusing on
08:02
the alleged surplus value going to the
08:03
so they can’t the losses against the
08:06
workers and somehow capitalism
08:08
conspiring to keep the wages of people
08:11
are valid later keep them down a little
08:13
subsistence level on the other hand
08:15
George focusing and evil and evil
08:17
unproductive landlord getting an
08:19
increasing share of a national product
08:20
they should be expropriated now the
08:23
quick flick of a car does not believe it
08:25
should be expropriated and think in
08:26
those terms but it seems to me is pretty
08:27
logical but if you’re looking at
08:29
pictures of injustice rather than only
08:30
economic analysis you will wind up with
08:32
either if you roll a card in in one of
08:34
the video and walks us through George’s
08:36
some people of course take both paths or
08:38
amok so George’s okay so this is the
08:42
second big dominant force and
08:45
classically British classical economics
08:47
a third one well firstly exactly how can
08:50
they be so long after they focus on this
08:52
unreal situation labor hours and by the
08:56
way the labor theory of value I think
08:57
should backtrack a slightly on that this
09:01
is pure speculation but I think it’s
09:02
probably true but it’s no accident only
09:06
in Scotland the labor theory of value
09:07
originated nobody in the continent
09:10
nobody in France Italy no the Spanish
09:11
scholastics it was thought in terms of
09:13
they said labor comes from consumers
09:15
consumer the mayor told in terms of
09:18
labor value it seems to be not an
09:19
accident because the Scotland of course
09:21
is the classical home of Calvinism the
09:23
Calvinist doctrine is that people labor
09:27
is a key thing folks everybody is doomed
09:29
to work consumer enjoyment by the way is
09:32
evil and as Adam Smith said us if you
09:35
started the useless you mean the only
09:37
reason you consume anything to allow you
09:39
to keep working in because of God’s
09:40
commandment the sufferer keeps suffering
09:43
so this sort of Calvinist Anitha leads
09:46
pretty quickly I think to a liberal
09:48
theory value to us two big fallacious
09:51
aspects of the British classical school
09:53
labor theory value or cost theory value
09:55
one two classes or aggregate class
09:58
struggle over shears of income now first
10:00
things that focus totally on non
10:02
existent unreal long-run equilibrium now
10:06
this is done right now by modern
10:08
microeconomics and macroeconomics that
10:10
matter currently all class neoclassical
10:14
economics focuses solely on reason the
10:17
blue rock mentioned before they don’t
10:18
talk about entrepreneurs they don’t
10:20
freeze simple why they don’t talk about
10:22
burners they don’t solve entrepreneurs
10:24
never didn’t deal with
10:25
change and uncertainty you make a profit
10:27
if you can forecast better than the next
10:29
guy you make a lawsuit if you can’t
10:31
forecast then perfect in long-run
10:33
equilibrium less or forecast anything
10:35
nothing ever changes
10:36
there’s nothing ever changes everybody
10:39
has perfect knowledge as they call it
10:40
perfect knowledge perfect everybody’s in
10:43
perfect competition no one certainly
10:45
there’s no risk they’ve no profits and
10:48
no losses and so the entrepreneur then
10:50
because of pain in the neck it becomes
10:51
of messing up your nice mathematical
10:53
system and this again stems from Bruce
10:57
classical screw it and didn’t have a
10:58
mathematical diagrams or anything but
11:00
they have the the essence Ricardo
11:02
particular focusing only on long-run
11:04
equilibrium as a result of three the
11:08
fourth thing which goes along with this
11:09
is again Ricardo’s contribution of
11:12
economics thought quote contribution
11:14
unquote is to separate the ride totally
11:17
the macro from the microsphere was an
11:19
old girl familiar that over this taking
11:22
current economics there’s micro the
11:24
first term of the second lover second
11:26
term
11:26
Michael you learn about supplying the
11:27
man or whatever and then some of you
11:29
leap in the macro nobody talks about
11:31
supply oh man they will talk about
11:32
growth curves and velocity and relax
11:34
totally different and this whole split
11:37
starts the quarter also okay and the
11:41
sort of with Ricardo the quantity of
11:42
money only determines the general price
11:44
level be increased the money supply
11:46
prices go up has no impact on production
11:49
on profits or interest on relative
11:52
prices or anything else it just sort of
11:54
like to hermetically sealed spheres of
11:56
the micro sphere of things are going on
11:57
so clearly understand the boat supplying
12:00
the man prices and all that none of the
12:02
macro sphere totally cuddle off on the
12:03
micro where you have money and prices
12:06
bouncing up and down with no
12:07
relationship between the two okay within
12:10
that kind of British cross school school
12:11
dominance by the way now turns out not
12:14
everybody was recording in from 1890
12:16
1971 the British them solid began a peck
12:19
away at accordion ISM shortly after he
12:22
died
12:22
biking thirty-year no recording
12:25
left but what happened was a John Stuart
12:27
Mill was erected accordion ISM his
12:31
famous principal 1948 he has such
12:34
tremendous moral authority by the public
12:36
they so revered understand anything he
12:38
said was except for this lost gospel
12:40
truth and so he restored Ricardian ISM
12:43
to its phenomenally place to the
12:46
dominant pedestal and he did it because
12:49
he was brainwashed by his father it was
12:51
a top recording and so on so on so but
12:53
again that can of worms is quaint
12:55
anyway is that atmosphere that calm
12:58
anger the founder of Austrian economics
13:00
life is great path-breaking magnificent
13:03
book principles of economics in 1871
13:05
well he does heat those on the earlier
13:08
Continental tradition but essentially he
13:10
develops this whole path-breaking system
13:13
okay what is that what some of up the
13:16
Austrian system was created by minder
13:18
and a student on board Eric at the
13:20
University of Vienna essentially it’s
13:23
based on methodological individualism I
13:25
was focusing on the individual first
13:27
individual’s actions the individual the
13:30
ideas the individual or the purpose as
13:32
goals and once he or she wants to pursue
13:34
in order to pursue a goal you have to
13:37
use resources or means to pursue them
13:39
and it takes time to do all this at
13:41
separate sucker you start with crew
13:42
sowing and work on up two different
13:45
individuals and exchanges and building
13:47
up the whole economic analysis from the
13:50
individual and it hadn’t really been
13:52
done before the nun partially had never
13:53
been done systematically as menger did
13:56
it
13:56
and as Mubarak did developing it even
13:59
further especially in capital Syrians
14:01
and to proneural theory so looking at it
14:05
that way you realize that the purpose of
14:06
production is consumption the idea of
14:08
reason why the inventor worked 200,000
14:10
labour hours
14:11
he hopes that somebody will buy it and
14:13
so value is conferred by the consumers
14:16
by the demand of consumers and goes
14:18
backwards from those subjective
14:20
evaluations of consumers down through to
14:23
the factors of production that they
14:24
people receive income so you have in
14:27
other words of the man’s theory or a
14:28
consumer to man theory of value the
14:30
subjective value
14:31
some of the course of production
14:32
doctrine and now of course me to
14:34
immediately explain why Rembrandt’s are
14:36
now you might be two million dollars now
14:38
1 million dollars ten years ago because
14:39
consumers are paying more for they’re
14:41
willing to pay more for it now they were
14:42
before the valuations are higher even
14:46
because of general inflation have more
14:48
money or because Verne Manson Alfred
14:50
more to other art than they were that
14:53
ten years ago
14:54
so secondly we’re looking in focusing on
14:57
individual action we can see the
14:59
individuals taking make their
15:01
evaluations and marginal units this is a
15:03
so-called marginal revolution and where
15:05
they don’t take the red diamond paradox
15:07
which many on the other margin was
15:10
solved namely nobody is confronted in
15:14
real life we’re looking in real life
15:15
action
15:16
nobody’s confronted with a choice of all
15:17
the bread in the world versus all the
15:19
diamonds in the world other words that
15:20
the angel Gabriel came down to us
15:22
tonight and so you know captured
15:25
nationwide felons worldwide television
15:27
it’s a people of Earth listen you’re not
15:30
confronted with a choice between all the
15:32
bread on the world from now on forever
15:33
and all the diamonds in the world you
15:35
can lose one of the months set probably
15:37
most of us will vote for bread but the
15:39
point is we’re not confronted with that
15:40
kind of choice yet we’re confronted with
15:43
individual choice like should we buy a
15:45
loaf of bread or a five carat diamond or
15:48
something like that and in these
15:49
marginal units than we realize that
15:51
supply becomes a major focus here in
15:54
other words the more abundant the bread
15:56
is very abundant the unit of bread is
15:59
not going to be worth much because it’s
16:01
super abundant the other hands if
16:02
diamonds are very rare each individual
16:04
diamond be worth a lot and so in other
16:07
words these valuations take place in
16:09
units and marginally you so-called
16:10
marginal units and loaves of bread or
16:12
pounds of butter or whatever if you look
16:15
at it that way you’ll see why water is
16:16
might be very very cost may be priced
16:19
very highly in the desert and whatnot
16:23
much in a very high water area so this
16:26
solve the value paradox it have been
16:28
smaller for the continental such any
16:30
before but this is a much better neater
16:32
and more for
16:33
for our explanation another thing that
16:37
Austrians motion isn’t focused on is
16:39
that economics is not really a
16:41
quantitative subject it’s not really a
16:42
subject it’s not really a subject we can
16:45
make correlations and quantitative
16:47
measurements or stuff because value is
16:49
subjective and can’t be measured how
16:52
much do I how much do I prefer I prefer
16:54
for example Wonder Bread of tasty bread
16:56
how much who knows I can’t say be
16:59
pointless for me to say I prefer 3.8
17:01
times as much of the loaf of tasty bread
17:03
and everybody’s got different he
17:05
certainly can’t add up people’s
17:07
subjective preferences preferences are
17:09
ordinal their ranking rankings sort of
17:12
snap refer wonder better tasty bread etc
17:15
so by looking at this we see with
17:18
Austrian we look at any Austrian book
17:19
you can almost tell a notion but by
17:21
looking at coming through it those are
17:23
no math and there but almost none and
17:26
one of the reasons is because it’s not a
17:27
really a mathematical subject it’s
17:29
really a philosophic subject okay and
17:33
the distribution front of the right so I
17:35
saw the British classical school talk in
17:37
terms of a class struggle between
17:38
different classes of income receivers
17:41
again the end of the Austrians focus on
17:43
each individual individual factor owner
17:45
the individual laborer individual
17:47
capitalist etcetera by doing that
17:49
they’re able to explain individual
17:51
factor prices which the crisis has never
17:53
even talked about and pointed out in the
17:56
free market through compact competitive
17:58
action intrapreneurial action tends to
18:00
win peel to each individual factor how
18:02
much how much has his productive share
18:05
of a product souk so-called marginal
18:08
product or marginal value product each
18:10
factor tends on the market earn its
18:12
marginal value product its contribution
18:14
so the goods being produced so no one or
18:17
any split between production on the one
18:18
hand distribution on the other John
18:20
Stuart Mill said the theory production
18:21
of all worked out is totally separate
18:23
from the Nereus tribution this of course
18:24
these very quickly to the socialist
18:26
position because you say well we’re sure
18:28
we’re in favor of production will allow
18:30
people to produce normal grab this only
18:31
income and divide it equally as a more
18:35
two more two people six feet or whatever
18:37
whatever theory distribution of God but
18:40
also economics you realize there’s a
18:41
except those separate process coal
18:43
distribution precision comes right out
18:45
of production people earn what they
18:46
contribute to the production which race
18:49
it’s very simple that and also bombard
18:52
our plan a first time and Frank Federer
18:55
the American illustrate and develop that
18:56
clarified it tryst long-run profit the
19:00
terminal terminal comes from time
19:02
preference
19:03
this is something my whether your
19:05
opponent I usually people could never
19:07
figure out the Catholic Church
19:09
theologians who couldn’t who tended to
19:11
be favor the free market they couldn’t
19:12
figure out what the justification for
19:14
interest their interest I’m a pure loan
19:16
they can understand about risk they
19:18
understood about uncertainty in the lab
19:20
they just didn’t understand about why
19:21
should people be able to charge three
19:23
percent or eight percent over up on a
19:24
pure loan and the answer is that people
19:26
prefer a good right now to waiting for
19:29
the president expectation would good
19:31
coming in here from our ten years from
19:33
now or a hundred years from now the
19:34
everybody’s got a time premium rate and
19:36
present with immediately available and a
19:40
discount for the future of the determine
19:42
of the rate of interest also Bambara
19:45
pointed out and men go to the capital by
19:47
the way modern economic stores not
19:49
learned the capital takes time
19:51
production takes time capital is a time
19:53
structure some goods are very close to
19:55
consumers like in producing Wonder Bread
19:59
and the retailer was very close to the
20:01
consumer in the other hand like
20:02
machinery or those other my iron ore
20:04
that goes into making the machinery of
20:06
produces wonderbra’s way up the
20:07
structure takes a lot of time to get to
20:09
the earlier stage of production or a
20:12
higher order of production so we have
20:14
then production taking time we have
20:17
capital not as a homogeneous lump which
20:19
modern economics food tends to say just
20:22
add more capital even if it’s somehow a
20:24
blah about their capital is a
20:26
latticework it’s a network structure
20:28
which has to all have to fit in together
20:30
and by the way only the free market can
20:31
fit in in only entrepreneurs the profit
20:34
loss test profit loss and central event
20:36
every price system can do the fitting
20:38
see one of the powers of socialism for
20:40
example they can make some stuff but
20:42
they can’t can’t fit it together often
20:44
and Russia they have a situation where
20:46
the bristles toothbrush shortage Louis
20:48
under the tooth pressure why is that so
20:49
special as well
20:50
those are in Tomsk ‘only and the handles
20:52
are in pumps and they just didn’t they
20:54
never set the bristles together by the
20:55
handle and the three mark you never have
20:58
this problem everything fits good
20:59
there’s a constant feedback mechanism so
21:01
to speak a profit and loss and a free PI
21:05
system and Bambara points I pointed out
21:08
the capitalist entrepreneur again again
21:10
we focus on intrapreneurial strengths in
21:12
other words the equilibrium is a
21:14
tendency and that was never reached it’s
21:16
a goal it’s a never it’s ever-changing
21:19
goal and they never reach it
21:21
so Austrians focus on the process the
21:23
real-world process by which the economy
21:25
tends to move toward equilibrium and
21:27
thereby force we have a whole world of
21:29
risk and uncertainty and change which is
21:31
the real world issues which equilibrium
21:33
economics doesn’t talk about so
21:35
therefore the intrapreneur becomes a key
21:37
figure in the whole process the profit
21:39
and loss system the incentives to make
21:41
profit and to avoid losses and so the
21:43
capitalist entrepreneur in Austrian
21:45
Theory earns a 2-part return one is an
21:48
entrepreneur by forecasting better than
21:50
the next guy and be able to forecast the
21:52
future forecast about the man will be
21:54
FERS product what costs will be and also
21:56
two of the capitalists saving up money
21:58
and then paying workers right now in
22:00
advance of its production and sale for
22:03
which the workers in a sense pay him at
22:05
this count they pay in the interest
22:07
return and happy to do it because they
22:09
don’t have to wait five years for
22:10
payroll okay so these are the two basic
22:13
functions of a capitalist entrepreneur
22:15
entrepreneurship and capital saving and
22:18
investment okay in this atmosphere this
22:21
briefly sketched out Austrian economics
22:23
before von Mises
22:25
Menger bomb barber better Louisville
22:28
living von Mises comes at bullying
22:31
making eating won the bin yet young
22:33
student of Bambara explained the seminar
22:35
in risky Vienna essentially what he saw
22:38
was that the Austrians had already fixed
22:40
up these classical errors of four big
22:42
British classical errors value
22:44
distribution and equilibrium but the one
22:47
thing they hadn’t done yet one of the
22:48
main thing they hadn’t done yet was the
22:51
heel the micro macro split other words
22:53
the Austrians stole had only talked
22:54
about micro I hadn’t they weren’t able
22:57
to extend the Austrian economics to the
22:59
theory of money so that was the that was
23:02
the first great accomplishment
23:04
and his magnificent first book theory
23:06
money in credit came out of 1912 and
23:09
it’s a great store the best thing ever
23:11
written on money what he did was he
23:13
healed a split this artificial split he
23:14
applied the margin utility Theory
23:17
ergonomics to money integrated that he
23:20
made he micro and macro one whole
23:22
beautiful integrated system of economic
23:25
analysis he pointed out for example when
23:29
get the money I’ll use and then you’ll
23:30
forget about supply and demand
23:31
purchasing power of money you know where
23:33
the value of money can be sighs incited
23:35
on the same basis as individual goods
23:37
and services namely supply and demand an
23:39
increase of the supply of money lowers
23:42
its value just in case of bubble gum
23:45
earner coffee and the increase of
23:47
demands for money raises its value just
23:49
like any other good however there’s a
23:51
big difference in this he applies some
23:52
of the Ricardian currency school and
23:54
cites the big difference between money
23:57
on the one hand and other goods on the
23:58
other hand other goods are necessary to
24:00
production in other words specific
24:02
quantities for example other things
24:05
being equal to increase resources or
24:07
increase the supplier doesn’t services
24:09
people’s hast a no living go up that’s a
24:12
good thing so to speak to have more
24:13
define new resources to find the oil
24:15
strike or to increase productivity okay
24:19
feel this fear of money it’s very
24:21
different the only real use of money is
24:23
exchanged you know eat money
24:25
put a bluntly and once you have enough
24:28
money to become money on the market you
24:31
don’t need anymore in other words any
24:33
supply of money which is arriving on the
24:35
market as optimal you don’t need any
24:37
more money coming in so the only thing
24:40
that increase the money supply does then
24:43
only social effect is a dilute
24:45
purchasing power of each existing
24:47
pre-existing dollar go Lance or mark or
24:51
whatever the currency unit is so any
24:54
increase in money supply is increasing
24:55
different services as good that
24:56
increases the standard of living
24:57
increase in capital equipment is good
25:00
increases future standard of living
25:01
and increase the money supply is
25:02
pointless because all it does is dilute
25:05
the purchasing power of the original of
25:07
the existing unit and those social
25:09
utility whatsoever under the gold
25:11
standard does but
25:12
increase of gold supply as a
25:14
non-monetary function on whether you
25:16
need you can use more go for jewelry
25:18
watches teeth that sort of stuff okay
25:20
but under paper money of course there’s
25:23
no social function whatsoever listen it
25:25
doesn’t simply dilute purchasing power
25:27
of the dollar and me just goes into this
25:30
nice shows basically that more money and
25:33
increase the money supply beyond the
25:34
amount of gold available or silver
25:36
available redistributes destroys
25:39
Kannamma calculation generally messes
25:42
everything up messes up the production
25:43
system what happens is a tax where the
25:46
first receivers of money
25:47
benefit the expense of the late
25:49
receivers it’s very much like
25:50
counterfeiting as a matter of fact it is
25:52
the set of essentially those are
25:54
legalized monopolies counterfeiter and
25:56
the effect of the Fed increasing the
25:59
money supply or the Bank of England or
26:01
any central bank the section is very is
26:03
almost the same as any is any
26:04
counterfeiter you have a legalized
26:05
counter for pouring out money down here
26:07
NR you’ll have the same sort of effect
26:09
an increase moves income of people in
26:12
Anaheim first of the counterfeiters next
26:15
of the people account afford to spend
26:16
the good money on retailers let’s say in
26:19
Anaheim they’re in great shape they love
26:21
counterfeiting right and so then we
26:22
begin to spend more prices begin to go
26:24
up those of us who don’t live in Anaheim
26:26
who have a fixed income lose so the
26:29
inflation process is essentially a
26:31
counterfeiting process except that
26:33
people on the run from the Treasury
26:35
Department it is the treasurer it is the
26:36
Federal Reserve doing it okay
26:40
so meters also built on the call
26:43
menger’s classic article on the origin
26:45
how money originates and expanded that
26:48
the show the money has to originate this
26:49
way namely out of the free market of the
26:52
voluntary actions of those of the
26:54
individuals trying to overcome with
26:56
tremendous difficulties of border he
26:58
shows that money has to originate that
27:00
way money cannot originate as a
27:01
government edict or watch some social
27:04
contact everybody gets together one big
27:05
convention it says let’s make that money
27:07
it can’t work that why has to work out
27:09
of a market commodity unfortunately of
27:11
course on the government could take it
27:12
over and mess it up but it has to
27:14
originate as a the market valuable
27:16
market commodities such as gold or
27:18
silver but you’ve always now competed
27:20
all the other multiple commodities once
27:22
if given a chain
27:23
people know about gold and silver that
27:25
society knows about they will accurately
27:27
will out-compete them also Mises showed
27:30
us the Romanian credit that fractional
27:32
reserve banking is essentially
27:33
fraudulent essentially for issue of
27:36
fraudulent warehouse receipts to
27:38
non-existent gold or cash to lose this
27:42
whole process and the ideal system would
27:43
be hundred percent reserve banking we
27:46
believe however I think it’s problem is
27:47
true under a genuine free banking system
27:50
in other words the banks were compelled
27:52
to meet their contract like everybody
27:54
else’s forced to meet that contraction
27:56
they say I’m going to give you gold on
27:57
demand if you don’t give a thing you go
27:59
bankrupt that were true we’d have a hard
28:02
money we have an approach toward our
28:03
percent reserve system unfortunately of
28:06
course has never worked that way the
28:07
banks always being bailed out one way or
28:10
another and also he showed in the theory
28:13
money in credit that the utility fixed
28:17
up the mark utility here he shows he
28:18
showed it’s ordinal and can’t be
28:20
measured the other member roburt week on
28:22
at me showed you can’t since if its
28:25
objective you can’t and you can’t
28:27
mathematize it I mean right now micro
28:29
textbooks look at any any micro textbook
28:32
I talk about you holes you talk about
28:33
utility theory I said well we have you
28:35
told if some people some things are
28:37
worth five years other things worth
28:39
eight you blew those those are things
28:40
that you Lord XE util doesn’t exist
28:42
okay but if you assume that such a
28:45
things that you Lincoln mathematize that
28:47
you calculus and have graphs and
28:49
tangents large junk it just doesn’t work
28:52
there’s not true okay we’ve had junk in
28:55
mathematics that isn’t junk however on
28:56
economics okay in addition to all that
28:59
is an enormous contribution already
29:02
clearly money credit had the genesis and
29:05
a few pages the outline but would become
29:07
his theory of the business cycle late
29:08
Austrian theory of the business cycle
29:10
he’s asking in theory of business cycle
29:11
and during the nineteen twenties he
29:13
expanded on that and the work which has
29:16
been translated since then are called on
29:18
manipulation money and credit an
29:21
interesting Li enough what happened was
29:22
most of us embarked and most of the
29:24
students course rejected this hello
29:26
application of money in business cycles
29:27
could services on the sound and so forth
29:30
and some easels
29:31
myah near of scorn even in Austria let
29:34
there not even that situation okay an
29:37
Austrian business cycle theory which
29:38
develops during the 1920s with FA Hyack
29:40
as the famous major follower but lots of
29:44
other followers as well basically what
29:46
Mises did was he took took his own money
29:49
in banking fearing what determines the
29:51
prices purchasing power of money and he
29:55
also took the currency school Ricardian
29:58
currency school insight which you know
30:00
the famous model if you increase the
30:01
money supply places will go up and then
30:03
you have a deficit the balance of
30:05
payments because spices were PGI and
30:07
imports will go up and export will go
30:10
down
30:10
he realized with tremendous insight this
30:12
is essentially in a business cycle
30:13
theory never talked about such in the
30:16
textbooks will not only a theory money
30:19
in a theory of international payments
30:20
with also a business cycle theory this
30:22
is a simple model the bank’s pumping
30:25
money prices go up as euphoria and
30:27
something happens they have to
30:28
contracting this bankruptcy and
30:29
liquidation it’s a very simple model of
30:31
a business cycle he combined that means
30:34
this with big souls which over the
30:36
Swedish Austrian swim barbaric follower
30:39
combine that with excels analysis of
30:43
interest rates and how if the local
30:45
banking rate falls below the natural
30:46
rate of interest of them of the free
30:48
market rate of interest of the inflation
30:50
it’s combined that and wound up with
30:52
with a integrated magnificent
30:56
path-breaking theory a business cycle
30:58
essentially what it is but it says
30:59
there’s an increasing supply of money
31:01
and credit through the banking system
31:03
through central banking not only in
31:04
cause of inflation everybody will admit
31:06
that we saw what Neil classical’s will
31:09
lift that isn’t that it also causes
31:11
other disturbances it’s not just that
31:13
the Milton treatment call the helicopter
31:14
effect
31:15
own treatments I said we assume that
31:17
everybody gets and proportion increase
31:19
the money supply drop by some magical
31:21
government here a copter so everybody
31:23
gets thirty percent increase their there
31:25
can’t it doesn’t work that way of course
31:26
if it did work that way V Hill point to
31:28
it the reason why the gut would because
31:31
we don’t have an angel because Beneful
31:32
an angel Gabriel doubling everybody’s my
31:34
supply overnight to try to improve their
31:36
lot we have a legalized counterfeiters
31:39
in Washington or in London he
31:41
their money supply first and lending it
31:44
out or spending it and a ripples after
31:45
the rest of the society so they always
31:47
there was a one leg up in this electric
31:50
appropriation process Sunday right so we
31:53
just show that increase the money so
31:54
money in credits not only increases
31:57
prices it does it also disturbs messes
31:59
up the production system the whole
32:01
capital structure because one of the
32:03
problems with business cycle theory
32:05
there are two really basic problems
32:06
which any business cycle theory has to
32:09
explain one is how come under preneur
32:12
suddenly make severe losses in other
32:14
words entrepreneurs are trained and
32:15
forecasting they tend to be great
32:16
forecasters so lousy forecasters they go
32:18
out of business pretty quickly so
32:20
successful entrepreneurs tend to be good
32:22
forecaster how come all of a sudden it
32:24
turns out that all of them are many of
32:26
them are most of them but go bankrupt
32:28
they didn’t they didn’t fort a
32:29
successfully if their costs will be much
32:31
higher than selling prices and sudden
32:34
there’s a sudden cluster of
32:36
entrepreneurial error now this doesn’t
32:39
usually happen okay and usually an
32:40
economist or training or Austrian
32:42
certainly try if something really messed
32:44
up on a system you looked at government
32:45
government must be messing things up
32:47
somewhere and sure enough okay this is
32:49
so the second the second thing which has
32:51
to be explained is how come there’s a
32:54
much greater fluctuation and capital
32:55
goods there is in consumer goods no
32:57
words there’s much bigger boom let’s
32:59
saying machine tool the construction
33:01
enrolment industrial raw materials and
33:03
there isn’t detail sales
33:04
contrarily depression or recession hits
33:07
the much bigger crash and machine tools
33:10
construction and a sort of finish and
33:12
then a higher order goes into business
33:14
and retail goods should be just the
33:17
opposite a means a right it should be
33:19
just the opposite should be the first
33:21
thing should be hit would be consumer
33:22
goods quite the contrary in matter fact
33:24
during nineteen twenty nine thirty three
33:25
depression in fact all during the 30s
33:28
retail sales are pretty good shaping
33:30
only decline about twenty fifteen twenty
33:32
percent with other things was
33:33
construction note machine total decline
33:36
ninety percent eighty ninety out of the
33:37
sound was hundred percent and so that’s
33:39
that you have to focus on what explain
33:41
those two things well you lost only the
33:43
Austrian only the Mises theory only
33:45
Mises higher clearly explains these two
33:47
problems namely the increase in theory
33:51
money increase
33:52
why money and credit disturb is the
33:54
production structure leads messes up the
33:56
interest rate because more money is
33:58
pouring in the business business loans
33:59
and would have by voluntary savings and
34:03
leave your over expansion of capital
34:05
goods so-called higher order goes in
34:07
particular the construction raw
34:10
materials machine tool in sourcing
34:13
planets basic plant and under production
34:15
and consumer goods so what you have then
34:17
is a malinvestment than a whole bunch of
34:20
capital goods and the lower the boom
34:23
continues the more the worst of
34:24
malinvestment gets and so what happens
34:26
is coarser bit up too high for the
34:28
supply of savings available and as soon
34:30
as the predator expansion stops or slows
34:33
down significantly the recession hits
34:35
because then this amount needs
34:37
malinvestments are revealed it’s
34:38
revealed mouse starkly to the people the
34:40
intrapreneurs that they’ve now they over
34:42
bid costs and wage rates too high and
34:45
much too high for what they can sell it
34:47
to their to their buyers not for the
34:50
consumers so much but to the other
34:51
people they own the capital a good
34:53
structure what happens then is the
34:55
recession and the Austrian analysis the
34:57
recession is was unfortunate but
34:59
necessary process by which the market
35:01
returns washes out the unsound
35:03
investments and returns to a proper
35:06
balance between capital goods consumer
35:07
goods it was a labor land and capital
35:10
resources are shifted back the consumer
35:13
goods to a certain amount and out of
35:14
these news excessive capital goods
35:17
result as recession is a necessary
35:19
liquidation process and any government
35:21
interference the recession prolongs it
35:23
and makes it permanent it doesn’t allow
35:26
the recession process adjustment process
35:28
to work also in particular the key thing
35:31
that happens resources have to shift out
35:33
of capital goods and into consumer goods
35:35
and this means that wage rates and
35:37
capital goods prices have before so that
35:39
wellit’s of the consumer that so that
35:41
people ship the resource will ship to
35:44
top the wage rates up which you have the
35:46
New Deal did of course the prop them up
35:47
prevent them from falling
35:49
totally destroys the whole adjustment
35:51
process and prolongs the depression
35:52
permanently
35:53
what happened in 1930s okay this is
35:56
essentially the very gigantic capsule
35:58
summary in the Austrian business cycle
36:00
analysis and also by the way also
36:02
explained by current staff Latian that’s
36:05
really the only theory explains
36:06
inflationary recession because what in
36:09
every business cycle whether it was pre
36:11
World War two or right now capital goes
36:14
prices always going up higher than
36:16
consumer goods prices in a boom and
36:17
consumer those prices always going up
36:19
higher relative to capital goods prices
36:22
in a recession we’re still doing it
36:24
they accept early good old days and
36:25
means before moodier period during a
36:29
recession
36:30
everything was forward there’d be a
36:31
healthy deflation and we’re with prices
36:33
with fallen general money supply fell
36:34
the banks are in bad shape so the whole
36:37
money supply will go down prices will go
36:38
down but consumer this prices will go
36:40
down not as fast as capital goes prices
36:42
in other words retail sales furniture
36:45
will go down 20% and price let’s saying
36:47
and construction cement will go down 50%
36:50
so that’s still consumer those prices
36:52
would be higher those of the capital
36:54
goods prices they were before which is
36:56
what you need in a recession however
36:58
consumers would loved it because the
37:00
absolute prices where in money terms
37:02
were cheaper well now that we have a
37:04
Keynesian monetarist of semi Keynesian
37:07
take take over since 1930s the money
37:11
supply has never permitted to fall ever
37:12
ever again the Fed is always pumping
37:15
more money into the system sometimes
37:16
little less sometimes a little more as a
37:18
result during a recession we never had a
37:20
form prices ever
37:22
and so this healthy mask of the sugar
37:25
coating of the pill is now gone so the
37:27
consumer is in a recession out faced
37:28
with two problems among unemployment
37:30
bankruptcies and all that which they
37:31
always were faced with plus because
37:33
course of living keeps going up but as
37:35
consumer those prices are still going
37:37
out relative the capital goes price
37:38
except now that both going up in
37:40
absolute terms they’re not going down
37:42
because of healthy deflation so a right
37:44
we now have a situation we’re getting
37:46
the worst of both worlds every time the
37:48
recession we still kept big increase in
37:49
the cost of living plus we get our
37:51
employment was the result of 50 years of
37:54
fine tuning my beloved beloved economic
37:57
experts in Washington okay he gets back
38:01
the Mises person first clean these are
38:03
taught and developed as views
38:05
at the University of Vienna’s true we
38:07
never had a paid post me and whisky of
38:08
the items the scrim a against even even
38:10
in Austria and he worked for the Chamber
38:13
of Commerce so Department of Commerce I
38:15
guess it was in Austria and his seminar
38:18
the very famous seminar was purely
38:19
private he held it held in their offices
38:21
and chamber commerce and this seminar
38:24
the one that the fact that all the top
38:25
young economists in Europe and
38:27
philosophers and whatever he converted
38:29
very many of them and you are just with
38:30
the fuel of Hayek mock lobular Robbins
38:33
vogelin shoots and on and on even future
38:37
British Prime Minister gates coal
38:39
when was the Mises seminar was Labor
38:41
Party prime minister wasn’t nearly as
38:42
bad as the other Labour Party people
38:44
possibly because of musical influence an
38:47
edition of that this is tremendous
38:48
intellectual force that legions had a
38:51
menace the so-called Mises Christ which
38:53
means neither circle my way Muslim
38:55
wonderful thing is to go out every group
38:57
of intellectuals of Anna those they’ve
38:59
had their own cafe there were to 2,000
39:02
cafes and so each one have the
39:04
psychoanalysts the shrinks are there
39:06
cafe and the the positive s of their
39:08
campaign is at the ends of their cafe so
39:10
after the Mises seminar over they over a
39:12
pair the cafe in and talk and so forth
39:15
over coughing what our rooms been great
39:16
uh also politically Mises
39:19
single-handedly top the Austrian
39:21
inflation in 1920 stop it from becoming
39:23
hyperinflation there was a big inflation
39:26
but it didn’t get as bad as Germany
39:27
Martin largely because Mises custom
39:29
pressure by memos and improvement of
39:32
Florence he later in his motion
39:33
recollection said maybe he shouldn’t
39:34
have done that maybe would have been
39:36
better if own thing collapsed earlier
39:37
and we made quite the press of that
39:39
point on mention minute another thing he
39:42
needs is that he warned about the Great
39:44
Depression nineteen twenties was a
39:45
period were essentially a freeman.i
39:47
period in many ways a monetarist period
39:51
Benjamin strong the leader of the
39:53
Federal Reserve Bank’s here was putting
39:56
into effect
39:56
Irving Fisher’s doctrine which is
39:58
essentially pre feeding the night and
39:59
basically what it was it to keep the
40:01
price level constant that’s the key sank
40:03
price level and price level wasn’t be
40:05
cuspid wholesale prices remain was
40:07
saying all during the 1920s so they fear
40:09
though
40:09
probable inflation with everybody
40:11
complaining aback by definition of ice
40:13
level is constant is no problem however
40:15
the Austrian position was and still is
40:17
the price level is not the key thing but
40:20
especially because in capitalist
40:22
development the free market capitalism
40:25
prices have to fall because you have a
40:27
tremendous increase in outpouring goods
40:28
and services especially in productive
40:31
lives so prices tend to fall and stay in
40:34
unhampered market thereby spreading the
40:36
advantages of capitalist development
40:38
everybody in the country we can see that
40:41
now with specific things like computers
40:42
and calculators you know it’s calculated
40:45
store for five hundred dollars now much
40:47
better ones at eighteen dollars or TV
40:48
sets or personal computer tremendous
40:51
form prices during a tremendous
40:52
inflationary period by the way and so
40:56
what Mina’s pointed out was that the
40:57
fact that price well Wisconsin is not
40:59
such a great thing that they should be
41:00
falling the reason why it’s not falling
41:01
through the Fed no other central banks
41:03
were inflating money in credit and
41:04
propping it up and causing malinvestment
41:06
which will cause a recession big
41:08
recession even though prices have been
41:09
going up he was laughs a sinister
41:11
ridiculous of course the depression
41:15
where the crash proved incorrect he was
41:18
doing that during the 20s who developing
41:19
his business cycle theory did many other
41:22
things during the 20s unbelievable
41:24
achievement um we will decades for from
41:26
Mises socialism arises of course in
41:29
World War one after World War one her
41:31
communism really the same thing and
41:33
everybody everybody we still have to
41:35
start analyzing socialism socialism II
41:38
everybody realizes then and now by the
41:40
way that socialism has an incentive
41:41
problem that’s cleared everybody in
41:43
other words even socialist will lift us
41:45
yes yes we have an incentive problem the
41:47
incentive problem is summed up in the
41:49
famous motto under socialism who who
41:51
take out the garbage another really work
41:55
or who will go to Siberia
41:57
it’s another way to put it of the world
41:58
who go to Alaska who’s going to develop
42:00
you under
42:00
slap out the other developed region and
42:02
build it up well you can’t we can’t use
42:06
economic incentive under socialism
42:07
either either incomes are equal if
42:10
they’re set by some government authority
42:11
the good the good communists get higher
42:13
income delivered and certainly not set
42:15
by marginal productivity so who’s going
42:17
to go to Siberia to carry out the
42:19
garbage well the answer the socialist
42:21
traditional answer is course moral
42:22
incentives in other words people will or
42:25
the creation of the school a new
42:26
socialist man everybody be molded by
42:28
socialist government to become totally
42:30
altruistic and love the collective and
42:31
do everything for the collective
42:34
in other words slave labor will carry
42:36
out the garbage and go to Siberia
42:38
so even socialists recognize that this
42:41
is a problem but what Mises saw
42:42
something nobody else would seem to
42:44
learn with another problem even deeper
42:46
economic problem even if everybody has
42:48
the incentive even if everybody is not
42:50
has been brainwashed to be new socialist
42:51
man or woman and go out and work for the
42:53
collect whatever the collective does
42:54
I’ll do it can’t go to Siberia go to a
42:57
salt mine don’t care as long as the
42:59
state tells me I’ll do it how will this
43:01
they decide what to tell them to do
43:02
that’s the real problem socialists
43:04
there’s no way as socialistic government
43:05
can calculate and try to figure out
43:08
who’s who newly synthesized berry how
43:09
many people but price that we set who’s
43:12
going to carry out the garbage how many
43:14
people should carry out the garbages is
43:15
no way that socialist government can
43:17
calculate because it’s meters pointed
43:19
out there’s no free price system that no
43:21
private ownership of the means of
43:22
production by definition as though and
43:24
therefore there’s no property titles
43:26
there’s no free market in property
43:27
titles there’s no way to set up a real
43:29
price system there’s no way of socialist
43:31
government can calculate economic chaos
43:32
he pointed out as famous article 1920
43:35
which really upsets us socialism in
43:37
Europe committed really they trying to
43:39
answer all the 1920s and 30s or was the
43:43
whole famous calculation debate and you
43:46
also expanded this as great book called
43:47
socialism a couple of years later we
43:49
dealt with other aspects of socialist
43:51
any rate Lee when I was going to college
43:54
too many years ago the answer was Oscar
43:57
Lanka I’d already solved there’s no
43:58
problem because you have equations in
44:00
the life and the government the
44:02
government acts as if there’s a market
44:03
well it means is already
44:05
that is the wrong nonsense you can’t
44:06
this support solution is seems perfect
44:09
competition perfect knowledge the
44:11
socialist government has the perfect
44:12
knowledge already of course and prices
44:14
which obviously they don’t have ass the
44:15
whole point and also no socialist
44:17
government’s ever try to put the longer
44:19
solution into effect never as a matter
44:21
of fact what’s what’s happening is that
44:23
the socialist planning is broken down
44:25
you were sloppy as one and hungry you
44:27
bump fairly rapidly toward a free price
44:28
system and even China has one toe in
44:31
direction with price this and they
44:32
realize it doesn’t work and then this
44:35
isn’t true in a situation where they
44:36
still have the world market and world
44:38
prices to which the government socialist
44:40
governments could refer they know what
44:41
the price of wheat is okay and the world
44:44
socialist government they wouldn’t know
44:45
that they’d be totally totally at loss
44:48
so me just point out other words and
44:50
this shows other problem social them
44:52
can’t work I can’t calculate a modern
44:54
economic system
44:55
also during 1920s if neither put out a
44:57
theory critique of interventionism which
44:59
shows an intervention of the doesn’t
45:00
work in other words price controls
45:02
create shortages taxes cripple saving
45:04
and investment inflation causes problems
45:07
we sing protectionism the destructive he
45:09
said also he shows that a intervention
45:11
is intensively k-love as we see all the
45:14
time in other words intervention ISM a
45:15
government sets out a solid problem
45:17
somebody goes the government says is a
45:18
big problem too many people over 60 F
45:20
hangnail looks I have a big hangnail gap
45:22
got so you need a multi-billion dollar
45:24
hanging out solving
45:26
federal funding so the government that
45:29
investigates hanging out towards
45:30
billions of dollars doesn’t solve a
45:32
handout problem increase other problems
45:33
at the same time whatever I me too many
45:35
side effects math I hang out rug
45:37
it is so every time the government
45:39
intervenes it doesn’t solve the original
45:41
problem and creates two or three more
45:42
problems at which the government will
45:44
only have to have more intervention of
45:46
some two or three others or they can
45:47
just forget the whole thing
45:48
so interventionism is unstable has a
45:51
cumulative effect any go onward towards
45:53
social and we go back to the from market
45:55
where leaders already show of socialism
45:57
can’t work so socialism can’t work and
45:59
dementia isn’t unstable you’re left with
46:01
only one viable option for modern
46:03
industrial world lays a fair capitalist
46:05
and some Mises Minh becomes an
46:08
uncompromising hardcore lay they for a
46:10
capitalist pounding away day after day
46:13
on his question making some very
46:15
unpopular as you might expect and the
46:17
great book on liberalism which came down
46:19
liking 27-6 this footage also shows in
46:22
liberalism the political and civil
46:24
liberties aspect the economic private
46:26
property rights free-market civil
46:29
liberties and international peace are
46:31
all inextricably tied together well how
46:33
do with something fishy Latino to this
46:35
day so let’s a book that everybody read
46:38
with tremendous profit in addition to
46:41
all this nineteen twenty we’re not
46:43
through yet when meeting his
46:43
accomplishments he also sees as a
46:45
challenge to Austrian economics and the
46:48
methodological philosophical front and
46:50
the challenge were truth was twofold
46:52
basically and still layer by the same
46:53
two challenges on one hand
46:55
institutionalism which meters quo anti
46:57
economics and will idea economic
46:59
theories are no good any like will such
47:01
things economic theory essentially
47:03
economics becomes only history a record
47:05
of what’s going on ok so that’s the form
47:08
that this is really quite dominant in
47:11
the United States and 1920s institution
47:13
lost approach and to which has been the
47:15
dominant neoclassical approach logical
47:17
positivism with the idea that economics
47:20
has to be like physics a quantitative
47:21
measurable science we deduce things
47:24
therefore vaccines as good which you to
47:26
do stuff from them and predict the whole
47:28
the whole thing with the whole
47:29
unfortunately kind of metrics
47:31
mechanistic approach which were very
47:33
familiar with now the people are treated
47:35
as if they’re stoned and Adams
47:37
unfortunately people are not still down
47:39
there people have choices that country
47:41
they choose their purposes enrolled etc
47:44
and so this whole neoclassical economics
47:47
is totally often around track and so he
47:49
thinks about this means nice US forces
47:51
use on proxy ology when he calls the
47:53
correct recourse pranks geology the
47:55
correct analysis the Austrian analysis
47:57
of individual action where economics
48:00
essentially deals with logical
48:01
implications of facts that people act
48:03
now do you know the people act we just
48:04
look at you look at yourself you look at
48:06
other people you see that they act like
48:07
stones and atoms their purposes
48:09
now this knowledge all of economic
48:11
theory is deduced this is very
48:13
unfashionable
48:14
even more unfashionable now that free
48:15
market as you see meters had a tough
48:17
problem you not only have a fight for
48:19
lazy a fair capitalism which was
48:21
unfashionable enough he also had a fight
48:22
for methodology which is totally out of
48:25
fashion has it been in a race to 2880
48:28
physics time imitates eviction and laugh
48:30
and the success of nuclear energy and it
48:33
sort of effect so he sets forth this in
48:36
his great book gloom problem murder
48:38
national economy in 1933 which has been
48:40
translated later follows up a theory in
48:43
history and marvelous book wrote in 1957
48:46
showing a difference between theory and
48:48
history what their different their roles
48:49
are having though all this live en done
48:52
enough yet which is what twenty times as
48:54
much as the average economic
48:54
accomplishes in our lifetime he now
48:57
foresees while he sets forth the proper
48:59
methodology is now his passes to do
49:01
something well in other words to
49:02
construct the whole integrated system of
49:04
economic thought based on these on the
49:06
correct methodology and he does it he
49:08
does it was magnificent crowning
49:10
achievement national economy which came
49:12
in 1914 Geneva which unfortunately
49:14
neglected was during the middle of a war
49:15
anyway so it was totally neglected and
49:17
then expanded Italy voted in English and
49:20
expanded a human action in 1949 which is
49:22
the great works final concern and
49:24
twentieth-century
49:25
ok while he was doing this in making
49:28
thirty things were happening but means
49:30
of seeing economic so to speak it’s fun
49:32
1931 Mises was follower Hayek shifts
49:36
from Vienna to London School of
49:39
Economics he’s brought there by Robinson
49:40
he’s a seminar he starts giving lectures
49:43
and translating
49:45
investing in capital and business cycle
49:47
theory and every was everybody force a
49:50
little bit oppression oppression has
49:51
been predicted by any Orthodox
49:52
economists and he converts Hayek manages
49:55
convert all the top young economist in
49:57
England picks learner cattle door
50:00
Sir William Beveridge I wouldn’t say
50:02
yeah I mean you guys became Austrians at
50:03
that point if you read some of the
50:05
literature kn’l articles in England
50:06
nearly thirty two old sound like Mises
50:08
was fantastic Berkeley a few years and
50:11
they accept the means FC an analysis of
50:13
the depression depression came about
50:15
because of federal Federal Reserve and
50:17
Bank of England etc simple bank credit
50:20
expansion and then was prolonged by New
50:22
Deal intervention into the wage rates
50:23
and published works in separate
50:26
unfortunately Lind and even even
50:28
American to those days Americans thought
50:29
essentially were followers of English in
50:32
other words we will look to Britain
50:33
Utley they giving the big the center of
50:35
economic thought so the English
50:37
economics becoming Hayekian Americas
50:40
began they pick up the bull Alvin Hansen
50:42
a labor became the top American
50:44
Keynesian was becoming so semi Austrian
50:46
plus a few other people and suddenly
50:48
Mayo canes and general fury comes out
50:50
1936 that’s it treats everything in his
50:53
path and by the way came here as that
50:56
went out by was patiently refuting
50:58
Austrian economics but they’re not work
51:00
that way – I can’t be refuted they
51:04
didn’t even try doing it I just simply
51:06
was like the changing and hemlines of
51:08
changes fashions
51:09
everybody forgets the old stuff and go
51:10
on the new bandwagon all these people
51:13
accept Hayek all the people might
51:14
converted shift of the Keynesianism
51:17
shouldn’t have a big fashion which
51:18
totally the opposite almost every way of
51:21
Austrian thought the Hayek had
51:23
previously smashed literally cases
51:26
previous great book the treatise on
51:27
money which came in 1931 Hayek able to
51:29
long reviews and economica showing the
51:32
whole thing is hogwash
51:33
and was so expected that Keynes had to
51:35
go back to the drawing board and do
51:36
something else so and gentlemen
51:38
came out hi egg made his week strategic
51:40
error he said question I refute this
51:42
will be gone a couple of years old so
51:44
and so wrong fortunately didn’t try he
51:46
didn’t do anything about it
51:47
and lessons unfortunately history
51:49
strongly economists always on the ones
51:51
of the proposed inflation and mount and
51:53
deficit spending and here all of a
51:55
sudden deficit spending comes a great
51:56
thing but as economically required as of
51:59
course all the government’s love that
52:00
only economists blah blah Connecticut
52:02
good cushy cushy jobs in the
52:04
establishment so while this is going on
52:06
for Mises now is we hip is a refugee
52:09
Dustin he flees Vienna which you become
52:11
Nazi in the 30s and goes of Geneva and
52:14
when Germany Casa as Western Europe he
52:18
in his wife fleet in United States was
52:19
really sort of I was really like a movie
52:21
scenario because they could go just just
52:23
the head of the German army and his
52:25
notes and recollections which is a
52:27
horrible see you wrote during 1940 very
52:30
depressed as you can imagine he like
52:32
something he didn’t think when you start
52:33
off he was his fate with the quadrille
52:36
decline of civilization for the end of
52:38
civilization and he also says something
52:39
interesting there so the Mises major it
52:41
should be withdrew from economics and
52:43
bon viveur committed suicide because of
52:45
World War one other words look for the
52:47
world I want the end us to finish at the
52:49
end of the layer
52:50
ideals of liberalism classical
52:52
liberalism international peace and thing
52:54
markets
52:55
anyway so me in this state means it
52:57
comes the United States he’s pent up any
52:58
loss even if he’s about 16 years old or
53:01
so he starts writing in a new language
53:04
and the can’t get an academic post this
53:06
is mean the eternal blot on academia
53:09
this is a situation where every every
53:12
Marxist and semi Marxist and
53:14
three-quarter Marxist we’re getting
53:15
pushing top cheers guy at Harvard and
53:18
and pinch them in whatever and means
53:21
means couldn’t find economic post he had
53:23
finally got one NYU and the visiting
53:25
professor or the salary paid for by
53:27
outside businessmen and foundations and
53:30
say they having a Hayek high ex post IX
53:32
salary University of Chicago would never
53:34
pay for by Chicago is paid for by
53:35
outside business groups as a result
53:39
meters were scoring in the Maya the Dean
53:41
was against them dealer advice people
53:42
have to take a course in the
53:44
see here he wasn’t fantastically
53:46
miserable situation and yet what was in
53:49
his where I come to the picture I got to
53:50
no one at this point I mean started a
53:52
seminar NYU what was this spirit about
53:55
this how did he act was magnificent I
53:56
couldn’t believe that he really was
53:58
cheerful it’s never better and ever said
54:00
that unkind word about anything any
54:01
person and as constantly try very sweet
54:04
as costly trying to urge people be
54:06
productive any spark of productivity and
54:07
he was clunks the mealy nourished I mean
54:11
listen he didn’t people I far below the
54:14
level of Hayek and hardball or etc he
54:16
didn’t seem to bother a monologist just
54:17
great
54:18
he try to reestablish the seminar
54:20
atmosphere of the me of the Vienna we
54:22
went out the Charles restaurant I think
54:24
it was after waiting then and discuss
54:27
things it was he was kindly when
54:29
complaining was never better and I was a
54:31
just magnificent experience I tell that
54:33
polish story of a four-month-old again
54:35
nothing is classic about measles it will
54:37
rain timid ate first of all half of
54:39
people that know anything didn’t care
54:40
just there to get there they’re an
54:41
automatic bee or a or something the list
54:44
of people those who were interested
54:45
outside auditors mostly yeah we’re too
54:48
intimidating this great man what do we
54:49
know what can how can we say anything so
54:51
what do you say look say anything you
54:53
want
54:53
and whatever whatever you say however
54:55
idiotic it is has already been said
54:57
before you buy some eminent economist of
55:01
course he’s right he was right he tell
55:04
these great anecdotes about Max Bay his
55:06
friend Max Weber and things like that
55:07
and so they’re just they’re just
55:09
marvelous
55:09
being scoring to the separate not having
55:11
any any followers of beginning he liked
55:13
human actions this great crowning work
55:15
when human actually came out I was going
55:17
up to see at the time which is
55:19
foundation for economic education which
55:21
is the only literally the only
55:22
free-market Houston in the country it’s
55:24
not like now every we Tom Dick and Harry
55:26
says he’s a favor the free market they
55:28
said visas I hadn’t met me this year
55:30
they said he’s coming out with a new
55:31
book I so what’s it about they said
55:33
everything
55:34
and sure enough it’s about everything
55:35
it’s that’s it the whole world lacks the
55:38
urge you to read it emits a low energy
55:40
oh it’s magnificent
55:42
and I think thence but some despite
55:44
these conditions it’s like the fabric
55:46
recessional under which he worked there
55:48
were some range of people that emerge
55:50
out of this means a seminar dresses then
55:53
holds Israel prisoner Sylvester Petro
55:55
proceeded raised and many other people
55:57
okay and it’s really a Mises has
55:59
inspired much of a current hard-money
56:00
movement I think it’s all it’s really
56:03
well do to him
56:04
he died at Indonesian ninety-two a 1973
56:07
after a remarkably productive life and
56:10
year later Hayek got the Nobel Prize
56:12
which sort of inspired other economists
56:14
one who’s by Hayek yzj a Nobel Prize and
56:17
it’s interesting that he got the prize
56:18
specifically for a community and work
56:20
that he’s in the 1930s New Jerseyan
56:22
business cycle theory which was swept
56:25
away in the kingdom revolution and since
56:27
then there’s been a notable Austrian
56:28
revival and I think toga Mises was just
56:30
unfortunate he didn’t love to see it
56:32
thank you very much
56:36
[Applause]

Murray N. Rothbard Quotes

In short, and this is a highly important point to grasp, the depression is the “recovery” process, and the end of the depression heralds the return to normal, and to optimum efficiency.Murray Rothbardhttp://www.readrothbard.com/quotes… (next quote)